By STEVENSON JACOBS
The Associated Press
Published: May 6, 2008

NEW YORK (AP) - Struggling with soaring food costs and
cash-strapped customers, restaurants across the country are
swapping expensive ingredients for cheaper fare and adding new
dishes that won’t break their bottom line.
Call it a menu makeover: Steakhouses are adding buffalo meat
alongside filet mignon, pizza joints are trying new cheese products
and seafood spots are replacing pricier entrees with humbler dishes
like catfish.
The changes come as record oil prices and surging global demand
for staples like rice, fish, poultry and wheat have pushed
wholesale food prices up almost 8 percent in the last year, the
biggest hike in three decades, according to the National Restaurant
Association.
Food commodities prices have mostly come down from record highs
reached earlier this year, but wholesale flour prices have still
doubled in the last year, while egg prices have shot up 70 percent
and cheese 25 percent.
“This is definitely an unprecedented period of wholesale food
inflation. Operators must focus on cost, and one way is using
different ingredients,” said Hudson Riehle, senior vice president
of research at the 380,000-member National Restaurant Association.
The organization recently surveyed restaurant operators and
found surging food costs ranked as their No. 2 concern after the
economy. A year ago, labor was their second biggest worry.
At Ben Benson’s Steakhouse in midtown Manhattan, wholesale costs
of prime beef have shot up 50 percent in the last year, forcing the
36-year-old establishment to raise the price of its signature
18-ounce sirloin steak from $40 to $46.
“The cost of beef is staggering,” said owner Ben Benson, who
has added new menu items like buffalo, boar and elk to help offset
the increases. “They sell very well. It’s not a big percentage but
they cost us a little bit less and we sell it for almost the same,
so it hedges a little bit.”
Bigger chains are seeing benefits of swapping ingredients, too.
Chuck E. Cheese restaurants recently began using a
“reformulated” pizza cheese at its 490 locations, helping the
company cut costs and turn in positive first-quarter earnings.
Richard Frank, CEO of parent company CEC Entertainment Inc., said
the high-moisture mozzarella blend gives customers a “cheesier
product” that spreads better and allows the chain to use less
cheese on some pizzas.
“It’s not a product we targeted because of cost ... but it has
helped us offset some of the cost pressure from cheese,” Frank
said, adding that customers haven’t voiced any complaints about the
change.
“We thought it had an enhanced taste,” Frank said. “When you
start to change your food products, you have to make darn sure what
you’re doing makes sense for your guests.”
Sysco Corp., the largest food distributor in North America, is
helping customers cope with high food prices, for example, by
suggesting less expensive meat cuts, butter blends and other
cost-saving substitutions.
“You can go from a filet mignon to a cut of meat that when
prepared properly tastes just as good or better but has a smaller
price point,” Sysco spokesman Mark Palmer said.
Industry professionals insist they’re not sacrificing quality
for cost when they substitute ingredients or menu items.
Clark Wolf, a New York-based restaurant consultant who has
advised high-end clients how ways to save money on ingredients,
said the idea is to “reconfigure dishes that have an end result of
being appealing food that we can afford to sell.”
“What you don’t want to do in an uncertain economy is make
people think they’re getting ripped off,” Wolf said.
So far, the changes haven’t seemed to faze consumers. Although
rising food costs, record oil prices and falling home values have
hit Americans hard, they still spend an estimated half their food
budget at restaurants because of convenience and time pressures.
“Even though cash is tight, consumers are pretty reticent to
back off on their restaurant habit,” the National Restaurant
Association’s Riehle said.
In another dining trend, T.G.I. Friday’s, Quiznos, Au Bon Pain
and other “fast-casual” restaurants are offering smaller, cheaper
portions. But the restaurants are finding that doesn’t mean people
are eating any less. Instead, many customers are using small-dish
dining as an excuse to add to their orders, spending - and probably
eating - just as much as before, experts say. The entrees may be
smaller, but diners believe that leaves more room for dessert.
Rising world food prices aren’t the only factors hurting
restaurants. At Captain Joey Patti’s seafood restaurant in
Pensacola, Fla., scarcity of the popular grouper fish have sent
prices skyrocketing.
“We took it off the menu as an everyday item because the cost
was outrageous. Now we’re selling catfish and mullet instead,”
said Josie Patti Merritt, co-owner of the 20-year-old family-run
business. Wholesale food cost represent roughly half of Merritt’s
business expenses, forcing to scale back her employees’ hours to
get by.
“My accountant told me I need to get my food costs to around 35
percent. I told him good luck,” she said.
For other restaurants, swapping food items simply isn’t an
option.
Marc Roth, owner of Roth’s Westside Steakhouse on Manhattan’s
Upper West Side, said he looked into buying cheaper cuts of beef
but couldn’t find anything to his satisfaction.
“I was looking at different cuts, organic meats, you name it
and I never felt it could keep the consistency. It was a tough call
but I had to make it,” Roth said.
Jack Johnson, owner of Dr. of Barbecue restaurant in
Springfield, Ill., said pork prices have shot up by a third in the
last year, but that he can’t replace pork because it’s his most
popular item. As a result, a pulled-pork sandwich that cost $4.95
last year costs $5.45 today.
To avoid future price increases, he’s considering acquiring a
big walk-in freezer and stocking it with a year’s worth of pork.
“But that’s a gamble because if the bottom falls out of the meat
market you’d be stuck with a ton of expensive cuts,” Jackson said.
Still, given that other restaurants are facing even more cost
pressure for eggs, cheese and bread, Jackson considers himself
lucky.
“At least I’m not in the pizza business,” he said.
AP Business writer Ellen Simon contributed to this report.